Muthoot Microfin Reports Strong Q2 Performance with 28% Disbursement Growth and Declining Credit Costs

Muthoot Microfin Limited , a leading microfinance institution, has reported significant improvements in its financial performance for the second quarter. The company has demonstrated robust growth in disbursements and a notable reduction in credit costs, signaling a positive shift in its business trajectory.

Key Financial Highlights

Disbursement Growth: Muthoot Microfin's disbursements grew by 28.1% compared to the previous quarter, indicating strong demand and improved operational efficiency.
Credit Cost Reduction: The company's credit costs declined to 3.6% from 9.4% in the previous financial year, reflecting improved asset quality and risk management.
Asset Quality Improvement: Gross Non-Performing Assets (NPAs) reduced from 4.85% to 4.61%, while Net NPAs improved from 1.58% to 1.41%.
Provision Coverage: The provision coverage ratio increased to 70.4% from 68%, demonstrating the company's prudent approach to risk management.
Profitability: Muthoot Microfin achieved a quarterly profit of INR 30.50 crores, compared to INR 6.00 crores in Q1, with total comprehensive income reaching INR 55.90 crores.
Net Interest Margins: The company's net interest margins improved to 11.9%, up from 11.5% in the previous quarter.

Portfolio Diversification and Growth

Muthoot Microfin is actively diversifying its portfolio with the introduction of new products:

Individual Loans: The company has built a portfolio of INR 468.00 crores in Individual Loans.
Micro LAP (Loan Against Property): A portfolio of INR 9.00 crores has been established in this segment.
Gold Loans: The company has initiated a Gold Loan portfolio, currently standing at INR 7.00 crores.

The Assets Under Management (AUM) have grown to INR 12,558.00 crores, representing a 10% quarter-on-quarter growth.

Operational Improvements

Cost of Funds: The company's cost of funds declined to 10.6% from 11.02%, indicating improved access to cheaper financing.
Collection Efficiency: Overdue collections have shown significant improvement, with monthly collections increasing from INR 6.00 crores to INR 19.00 crores.
Credit Rating Upgrade: CRISIL has upgraded the company's outlook from stable to positive, reflecting the improved financial performance.

Strategic Initiatives

Muthoot Microfin is focusing on several strategic initiatives to drive growth and improve profitability:

Customer Retention: 65% of disbursements are to existing customers, emphasizing the company's focus on retaining and growing relationships with proven borrowers.
Digital Transformation: The Individual Loan product is entirely on a digital platform, backed by eNACH, with a 95% clearance rate on time.
Branch Rationalization: The company is implementing a branch profitability module to optimize its network and improve overall efficiency.
Risk Management: Muthoot Microfin has developed an in-house scorecard to enhance its underwriting process and reduce delinquencies.

Future Outlook

Sadaf Sayeed, CEO of Muthoot Microfin, expressed confidence in the company's future performance. He stated, "We are on a path of transition, and we are successfully moving forward. Q2 was a demonstration in exact numbers that the performance of the collections is improving and the portfolio is improving."

The company maintains its guidance of achieving a 2% Return on Assets (ROA) and expects credit costs to decline further in the coming quarters. With a strong capital adequacy ratio of 29% and a growing AUM, Muthoot Microfin is well-positioned for sustainable growth in the microfinance sector.

As the company continues to focus on portfolio diversification, operational efficiency, and improved asset quality, investors and stakeholders can expect Muthoot Microfin to maintain its growth trajectory and strengthen its position in the microfinance industry.

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
+0.01%	-0.35%	+3.17%	+30.66%	-6.63%	-36.13%

Muthoot Microfin , a prominent player in the microfinance sector, has successfully raised ₹150 crore through the issuance of Non-Convertible Debentures (NCDs). This strategic move aims to bolster the company's medium-term capital through debt instruments, potentially enhancing its lending capabilities and overall financial position.

Key Details of the NCD Issuance

Particulars	Details
Instrument Type	Secured, Rated, Listed, Redeemable, Taxable NCDs
Total NCDs Allotted	15,000
Face Value per NCD	₹1,00,000
Total Issue Size	₹150.00 crore
Issuance Type	Private Placement
Listing	BSE Limited

Series-wise Breakdown

The NCD issuance is divided into two series, each with distinct features:

Feature	Series I	Series II
Number of NCDs	7,500	7,500
Total Value	₹75.00 crore	₹75.00 crore
Tenure	24 months	36 months
Maturity Date	November 11, 2027	November 11, 2028
Interest Rate	9.90% p.a.	10.00% p.a.
Interest Payment	Monthly	Monthly

Security and Compliance

The NCDs are secured by an exclusive charge via a deed of hypothecation over a specific asset portfolio of receivables of Muthoot Microfin. The company is required to maintain a minimum security cover of 1.05 times on the outstanding principal amounts of the NCDs along with the coupon at all times during the tenor of the NCDs.

This capital raise aligns with the approval received from Muthoot Microfin's Board of Directors on May 8, 2025. The allotment was made by the company's Debenture Issue and Allotment Committee on November 11, 2025, in compliance with SEBI regulations.

Potential Impact

For Muthoot Microfin, this successful NCD issuance represents a significant step in strengthening its financial foundation. The infusion of ₹150.00 crore in medium-term capital could potentially enhance the company's ability to extend microfinance services, supporting its growth objectives in the competitive microfinance sector.

Investors and market watchers may keep a close eye on how Muthoot Microfin utilizes this capital to drive its business operations and expand its market presence in the coming months.